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IRVINE, CA—In the 12 months ending in June, a total of 797,865 home-equity lines of credit were originated nationwide, up 20.6% from a year ago and the highest level since the 12 months ending June 2009, according to a report from RealtyTrac. The report also shows HELOC originations accounted for 15.4% of all loan originations nationwide during the first eight months of 2014, the highest percentage since 2008; however, this is still 76% below the peak of 2006.

“This recent rise in HELOC originations indicates that an increasing number of homeowners are gaining confidence in the strength of the housing recovery and, more importantly, have regained much of their home equity lost during the housing crisis,” says Daren Blomquist, VP of RealtyTrac. “Nearly 10 million homeowners nationwide, representing 19% of all homeowners with a mortgage, now have at least 50% equity in their homes, according to RealtyTrac data. Meanwhile, the percentage of homeowners with severe negative equity has decreased from 29% in the second quarter of 2012 to 17% in the second quarter of this year.”

Blomquist adds the rise in HELOCs also reflects a natural evolution for a lending industry looking for products they can offer to homeowners who have already refinanced their first-position loan into a low fixed rate. “A HELOC enables homeowners to leverage additional equity they may have gained since refinancing while still preserving the rock-bottom interest rate on their first-position loan.”

Blomquist tells GlobeSt.com, “Like many trends in the housing market, rising HELOC activity is generally a good sign, but there can be too much of a good thing. If we see levels approaching anywhere close to the 3.3 million HELOC originations we saw in the 12 months ending in June 2006—right before the housing bubble burst in August 2006—it would definitely be a sign that the housing market is overheated. But we're only at about one-quarter of that level with the 800,000 HELOC originations in the 12 months ending June 2014, so we still view this rise in HELOCs as a sign of a recovering market.”

The report also showed that inland California—particularly Riverside and San Bernardino counties—Las Vegas, Cincinnati and Phoenix posted the biggest annual increases in HELOC originations. Among the nation's 50 largest metropolitan statistical areas with HELOC data available, 49 posted year-over-year increases in HELOC originations in the 12 months ending in June. The only metro area with a decrease was Rochester, NY, where HELOC originations decreased 1%.

As GlobeSt.com reported earlier this month, investors buying rental property last quarter are getting an average annual return of 9.06%, down from an average annual return of 9.65% for the third quarter of 2013, according to a report from RealtyTrac. The report ranks the best US markets for buying residential rental properties.

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